Oil prices slumped again on Monday on concerns over scarce storage capacity, especially in the United States, and global economic doldrums from the coronavirus pandemic.
US oil futures led losses, falling by more than $4 a barrel on fears that storage at Cushing, Oklahoma, could reach full capacity soon.
US West Texas Intermediate June futures were down 27.3 per cent to $12.31 a barrel.
Brent crude was down 8.4 per cent at $19.63 a barrel. The June Brent contract expires on Thursday.
Oil futures marked their third straight week of losses last week, with Brent ending 24 per cent down and WTI off about 7 per cent. Prices have now fallen for eight of the past nine weeks.
"The market knows that the storage problem remains and we are on a calculated path to reach tank tops in weeks. Prices can't do anything else but decline when producers won't have anywhere to store oil soon," Rystad Energy head of oil markets Bjornar Tonhaugen said.
The June WTI contract’s price fall may have been triggered partly by investors moving to later months after the May contract lapsed into negative territory for the first time last week just before its expiry.
"The shift of open interest away from June will have negative consequences for the liquidity of the contract, potentially leading to greater volatility in its price." Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.
US crude inventories rose to 518.6 million barrels in the week to April 17th, near the record 535 million barrels set in 2017.
Cushing, the delivery point for WTI, was 70 per cent full in mid-April, though traders said all available space was already leased.
Global economic output is expected to contract by 2 per cent this year - worse than the financial crisis - while demand has collapsed by 30 per cent because of the pandemic.
“The current oil balance is simply awful, and no improvement is anticipated until after June due to the massive fall in global oil demand,” said oil broker PVM’s Tamas Varga.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, this month pledged to cut output by an unprecedented 9.7 million barrels per day in May and June.
Kuwait and Azerbaijan are coordinating oil output cuts, while Russia is set to reduce its western seaborne exports by half in May. – Reuters